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When it comes to making things and moving them around the world, no one does it better than
Ohio, according to a new report that gives the state an A for its manufacturing and logistics
efforts.

Still, the overall climate for Ohio’s manufacturers could be even stronger if the state can get
a better handle on unfunded liabilities such as pension costs and provide more clarity about taxes,
says the report from Ball State University’s Center for Business and Economic Research.Overall, the
report touts Ohio as one of the country’s manufacturing powerhouses.

“There are a lot of things manufacturers have found enticing about Ohio,” said the center’s
director, Michael Hicks, a Ball State economist.

A big worry for manufacturers: Having a highly skilled labor force ready to step in as aging
workers retire in coming years and to meet the technological demands changing the workplace.

“Manufacturing is very worried about the quality and availability of the labor force,” he
said.

The report scored the 50 states in nine categories that cover a range of issues. The report does
not rank states against each other.

Ohio was one of eight states to get an A in manufacturing-industry health and one of five to get
an A in logistics-industry health. Indiana was the only other state to get the same grade in both
categories.

But it was different story in the other categories. Ohio is in the C category in human capital,
tax climate, expected liability gap (ability to finance obligations such as pensions and bonds),
sector diversification and productivity and innovation. It gets a D in worker-benefit costs for
expenses tied to health care, workers’ compensation, retirement and other fringe benefits.

The D in worker-benefit costs stems in part from the heavy union presence in Ohio, which raises
labor costs, Hicks said.

While some of the categories don’t seem to have a direct tie to manufacturing, Hicks notes that
they become important to manufacturers because they can be an indicator of tax changes or the
ability to maintain public services, such as roads.

Hicks’ report said that the Midwest provides the manufacturing backbone for the country, but
that regionally, Illinois and Wisconsin struggle with their tax climate, and Illinois’ unfunded
pension liabilities continue to be threats to the region’s stability.

That Ohio scores strongly as a manufacturing center on the report comes as no surprise to state
and corporate leaders and economists.

The state’s manufacturing sector has been rebounding for the past three years after a brutal
decade in which Ohio manufacturers cut about 400,000 jobs. Manufacturers have added about 55,000
jobs in the past three years.

“It’s really an exciting time for manufacturing in Ohio,” said Kristi Tanner, a managing
director with JobsOhio, the state’s private economic-development agency. “We have had a tremendous
amount of investment.”

Significantly, the auto industry and suppliers have made recent investments totaling $1.6
billion in the state, she said.

She and Eric Burkland, president of the Ohio Manufacturers Association, did take exception to
the report’s comments on the state’s tax structure.

“For manufacturing, we have a good state tax structure,” he said, noting a state overhaul that
eliminated a number of manufacturing taxes.

Both also say that while the worker-benefit costs may be higher in Ohio, productivity increases
are offsetting that. A recent IHS Global Insight report found that productivity per worker is up
about a third since 2000. The state’s manufacturing productivity in Ohio outperforms other states,
Tanner said.

“Productivity is going through the roof in Ohio,” Burkland said. “The relationship of
employee-benefit costs to productivity is really key.”

Ohio’s transportation systems, airports and waterways also can make up for higher worker costs
and boost the state’s ability to manufacture cars and other items and then ship them around the
world, said Karl Kuykendall, an IHS economist.

“The global reach and exporting is quite large,” he said.

Information used for the report does not take into account some recent news in Ohio, including
changes in the state’s pension systems that are meant to keep them stable.

“I don’t think it is a real problem in Ohio over the long run if it is handled well,” Hicks said
of the state’s tax climate. “If it is ignored, it becomes one.”

What is a bigger worry for state officials is having an adequate pool of labor available to fill
openings and to replace workers who will be retiring in coming years.

It is critical “to be preparing workers for the future to ensure we have the talent that
companies need when they need it,” Tanner said.

Manufacturing is so much more advanced than it once was, she said. While workers might not need
to be college- educated, they will need technological training with a science and math background
that can come from community or technical schools, she said.

The state needs the right kind of training programs, apprenticeships and internships for
manufacturers to succeed, Tanner said.

But Ohio is not the only state under pressure to develop a capable work force.

“The state that is going to win will get on top of it first,” she said.